Arizona Public Service has quietly exited an industry group that lobbies heavily against federal air-quality regulations and is now central in an ethics investigation by U.S. House Energy and Commerce Committee members into top officials at the Environmental Protection Agency.
At least seven other utilities across the country have also cut ties with the Utility Air Regulatory Group in recent days, around roughly the same time that Democrats on the committee began sending out letters requesting documents, communications, and other records from the companies and their ties to the group.
Salt River Project and Tucson Electric Power, the other two Arizona utilities listed as members of UARG (pronounced "YOU-argh"), say they remain committed members of the group. But APS, under intensifying scrutiny from Arizona Corporation Commissioners for its political activities, has quit.
“As APS continues implementing an even cleaner generation mix, we have made the decision to end our membership with Utility Air Regulatory Group,” Suzanne Trevino, a spokesperson for APS, told Phoenix New Times. "We began evaluating our membership a couple of months ago and recently made the decision."
APS, a state-regulated utility, was not on the published list of eight utilities that recently received probing letters from House Democrats as part of their inquiry. Salt River Project and Tucson Electric were not either.
Those letters contained questions targeting the source of funds that utilities contributed to UARG. "Are these ratepayer or shareholder monies?" they asked. "If you have used ratepayer funds, has the public utility commission in each state in which you operate specifically approved the use of such funds for this purpose?"
If utilities did use ratepayer money, then those captive customers would have funded political and legal activities aimed at rolling back regulations that protect public health.
In 2017, the Salt River Project paid the group $215,599. APS and parent company Pinnacle West forked over $186,309, and Tucson Electric spent $170,413, according to an investigation by Politico published February 20.
APS has a documented history of spending ratepayer funds on UARG membership. In its rate case in 2016, a consultant testifying on behalf of Arizona's Residential Utility Consumer Office said that APS had asked ratepayers to pay $185,889 of UARG membership dues, on top of membership dues to other groups. Ultimately, those fees tacked on $946,663 to APS's rate request.
Joseph Barrios, a spokesperson for Tucson Electric Power, which, like APS, is regulated by the Arizona Corporation Commission, said that customers are the source of funding for its UARG membership dues.
The bills currently paid by Tucson Electric customers feed into the $1 billion in revenue the company requires each year, Barrios said. Of that, about $140,000 goes to dues for UARG. According to Barrios, Tucson Electric is justified in asking ratepayers to cover those dues.
"Membership provides some value to us and to our ratepayers," he said. Tucson Electric is a small utility that still depends heavily on coal to generate its electricity, he explained. In 2013, about 85 percent of Tucson Electric's electricity came from coal; by 2023, the company aims to generate 48 percent of its electricity from the pollutant-heavy source, with natural gas, wind, and solar providing increasing amounts of energy, Barrios added.
But given its reliance on coal, federal clean air regulations remain highly relevant for Tucson Electric. "Our membership with the organization, it basically provides us with interpretations and clarifications of federal air regulations that we are required to satisfy," Barrios said. "It gives us an opportunity to provide input in regulatory and administrative proceedings when new rules are being considered."
Asked whether the utility could justify asking ratepayers to fund UARG's lobbying and political activities that they might disagree with, Barrios said he would not weigh in on what he called a "bit of characterization." He added that although coal-fired plants would remain important to Tucson Electric for generating electricity, "we would be willing to consider leaving UARG in the future."
Scott Harelson, a spokesperson for Salt River Project, a non-profit whose rates are not regulated by the Corporation Commission, said via email that Salt River Project, as a UARG member, "is committed to thoughtful, bi-partisan discussion to provide a solid foundation for decision-making in the public-policy arena."
Salt River Project has participated in UARG for "more than three decades," Harelson added. Asked how long SRP planned to remain in UARG, he said it would "evaluate its relationship with UARG, like any other organization that it is engaged with and evaluate as to whether such participation is appropriately beneficial for SRP and its customers."
SRP's revenue comes from its water and electricity customers.
UARG is run by the lobbying firm Hunton Andrews Kurth, where Bill Wehrum, the head of air quality at the EPA, was a partner before taking a(nother) spin through the revolving door. UARG has existed since the 1970s, the decade after the Clean Air Act took effect, and since 2001 it has been a party in about 200 lawsuits that challenged federal clean air regulations.
The identities of its members, though, were largely kept under wraps, until February, when Politico's investigation exposed that information.
Politico, for its article, obtained confidential workshop materials from the group showing that in 2017, UARG took more than $8.2 million from 25 different utilities, including Arizona's APS, Salt River Project, and Tucson Electric, plus a handful of industry groups, to lobby and litigate against Obama-era Clean Air Act rules. Those rules "had significant adverse effect on electric generating units," according to those UARG documents.
On April 11, Democrats on the House Energy and Commerce Committee opened their investigation into whether EPA officials, including Wehrum, violated ethics rules by pushing to roll back regulations on greenhouse gases and toxic emissions including smog and mercury, to the benefit of Wehrum's former clients.
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Why APS pulled out of UARG is not crystal clear. The timing, as described by APS, aligns with the Politico report that exposed UARG's membership and the subsequent ethics investigation. But it also might have less need for UARG and its litigious targeting of regulations viewed as burdensome to utilities dependent on coal, a source that APS is backing away from.
According to APS, it generates electricity from "a diverse mix" of nuclear, coal, and natural gas plants, although it doesn't provide a numeric breakdown of how much energy actually comes from each source. It gets electricity from the nuclear Palo Verde Generating Station; the coal-fueled Four Corners Power Plant, Cholla Power Plant, and soon-to-close Navajo Power Plant; and seven natural-gas plants.
A third reason could be that APS doesn't want to take more heat. It is already under fire from three Arizona Corporation Commissioners, who in recent weeks have forced APS to divulge records and communications from its political operations and spending in 2014, 2016, and 2018.
That's on top of the FBI's investigation of APS, which began in 2016, into its involvement in several 2014 races. That case is still open.